Key Takeaways
- IRS e-file rejection practices called into question.
- Taxpayer Advocate explains how superseding returns work.
- Inspector General says IRS lax in monitoring free-file partner data practices.
- States find few taxpayers paying in cryptocurrency.
- French, Brits planning tax boosts.
- Pilot's tax tactics go off the runway.
- Mean Girls Day, National Boyfriend Day, National Techies Day.
IRS Is Unlawfully Rejecting E-Filed Returns, Attorneys Say - Lauren Loricchio, Tax Notes ($):
“What the IRS has done with these rejection rules is it’s done an end run around the math error procedures,” said Nina Olson of the Center for Taxpayer Rights. “The IRS is trying to avoid work, and it's putting the burden on taxpayers and abridging their rights.”
The article notes that a common rejection cause is that another taxpayer has already claimed a dependent that is claimed on the rejected return. This comes up in both divorces and when a college student files a return to claim a refund without mentioning it to the parents. If the taxpayer isn't on top of it - for example, if the e-file rejection email ends up in a spam filter - the return is considered to have never been filed, with all of the resulting baleful consequences.
What to Know About Superseding Tax Returns and How It Could Benefit You - Erin Collins, NTA Blog (my emphasis):
Generally, superseding returns are intended to replace or supersede (hence the name) a timely filed original return with a subsequent timely filed return. Superseding returns change items reported on an original return and must be timely filed before the original filing deadline, including extensions. The changes made by a superseding return are, in effect, incorporated into and relate back to the original return. Because it must be filed before the applicable deadline, a superseding return can only be filed within that limited window of time.
In contrast, an amended return changes items reported on an original return but is filed after the original filing deadline, including extensions.
Why it matters:
This is another reason extending returns can be helpful - it provides a longer window to file a superseding return. They are especially useful with partnerships, for which traditional amended returns may be unavailable under current rules.
IRS Too Lax On Tax Prep Partners' Data Practices, TIGTA Says - Jack McLoone, Law360 Tax Authority ($):
The Internal Revenue Service team that manages the program has in fact said it would not consider allegations of wrongdoing as a reason to remove a partner, TIGTA said in a report, dated Monday. TIGTA, the IRS' federal watchdog, also criticized the agency for not reviewing partners' privacy disclosures to determine if they comply with standards established by Internal Revenue Code Section 7216, which governs tax return disclosure rules.
Link: TIGTA report
Taxpayers aren't stampeding to pay with cryptocurrency
Crypto Tax Payments Get Few Takers as More States Eye Programs - Michael Bologna, Bloomberg ($):
Despite taxpayers’ general lack of enthusiasm for digital currency as a payment method, policy makers in a handful of states are lining up to follow Colorado and Utah. Arizona came close this year to passing a bill, S.B. 1128, directing the state to accept cryptocurrencies for payment of taxes, fines, and fees. An Ohio lawmaker introduced similar legislation, S.B. 317, last month.
It's not a mystery. Cryptocurrency is taxed as property, rather than as currency. This means paying taxes with Bitcoin would be considered a sale, triggering gain - and tax - on any appreciation.
More cynically, paying in cryptocurrency alerts the tax authorities that you have cryptocurrency. That may be a dealbreaker for any taxpayers who haven't been bothering to report crypto income.
Tax Politics, Tax Policy
Republicans heading for dispute over raising child tax credit - Semafor. "Republicans are on the verge of a family dispute – literally. On one side of the party’s divide are socially conservative groups focused on the benefits of promoting bigger families in America, who have long had a champion in JD Vance, Semafor’s Joseph Zeballos-Roig writes. But fiscal hawks are skeptical about Vance’s bid to use the tax code to boost falling birthrates. Trump has yet to endorse Vance’s $5,000 child tax credit pitch."
Tariffs Hurt Manufacturing - Alex Tabarrok, Marginal Revolution, quoting a paper by Aaron Flaaen and Justin Pierce of the Federal Reserve Board: "Indeed, we find the impact from the traditional import protection channel is completely offset in the short-run by reduced competitiveness from retaliation and especially by higher costs in downstream industries…[the] net effect is a relative reduction in manufacturing employment."
Combined Corporate Rates Would Exceed 30 Percent in Most States Under Harris’s Tax Plan - Garrett Watson, Tax Policy Blog. "Vice President Kamala Harris’s proposal to raise the federal corporate income tax rate to 28 percent would increase the combined average top tax rate on corporate income to 32.2 percent, the second highest in the Organisation for Economic Co-operation and Development (OECD), reducing US competitiveness and long-run economic output."
International Terminal
Eide Bailly's International Tax Team and our affiliates at HLB, the Global Advisory and Accounting Network, stand ready to help with your worldwide tax planning and compliance needs.
Understanding the UTPR - Alex Parker, Things of Caesar, discussing the "Pillar 2" undertaxed profits rule:
Of course, the problem with this (well, one of a few) is that Pillar Two ended up applying to many more situations than outright tax abuse, and no one can seem to agree on whether this is a feature or a bug.
French Prime Minister Michel Barnier announces tax rises and spending cuts - Leila Abboud, Financial Times:
...
Barnier’s decision to propose a budget next week that will include tax increases is a major break with the economic policies espoused by President Emmanuel Macron, whose governments have lowered taxes since 2017 in an effort to boost growth and competitiveness.
Surprise ruling on Apple’s taxes in Ireland raises questions - Ruth Mason and Stephen Daly, The Times:
...
Because the commission’s legal argument in Apple was identical to that in the cases it had lost, many commentators — including us in an article in The Times in March — anticipated that Apple would win its case.
Business owners look at leaving UK over prospect of capital gains tax rise - Emma Dunkley and Emma Agyemang, Financial Times. "A growing number of business owners are considering leaving the UK over concerns that the government is planning to increase capital gains tax in the Budget this month, tax experts have warned."
Blogs and Bits
IRS gives Hurricane Helene taxpayers relief. Here’s how you can help, too. - Kay Bell, Don't Mess With Taxes:
-Any individual or business that has a 2024 return normally due during March or April 2025.
-Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return. Note, however, that payments on these returns are not eligible for the extra time because they were due last spring before the hurricane occurred.
-2024 quarterly estimated income tax payments normally due on Jan. 15, 2025, and 2025 estimated tax payments normally due on April 15, 2025.
-Quarterly payroll and excise tax returns normally due on Oct. 31, 2024, and Jan. 31 and April 30, 2025.
Hurricane Helene IRS Relief for all of Alabama, the Carolinas, Georgia, and Parts of 3 Other States - Russ Fox, Taxable Talk. "This will extend not only individual and corporate tax returns on extension due on October 15th but next year’s March and April tax deadlines (along with a host of other filing deadlines)."
IRS Tax Penalty Forgiveness: Challenge Of Proving “Reasonable Cause” - Virginia La Torre Jeker, US Tax Talk. "While the penalties can be severe, taxpayers may be able to argue that the tax noncompliance should not be penalized since the taxpayer has “reasonable cause” for the error or omission. While reasonable cause can be crucial for avoiding penalties, it is not easy to prove. The taxpayer must demonstrate that he exercised ordinary business care and prudence in meeting his tax obligations but nevertheless failed to meet them."
Related: Eide Bailly Penalty Help services.
Debating tax with people in the park - Leonard Wagenaar, Leonard's Tax Posts. "The public has intuitions about tax that often differ from how tax works. Sometimes tax doesn’t do what people want, but people’s concept of tax is not necessarily coherent or workable."
Minnesota pilot gets 41-month layover
Former commercial airline pilot sentenced to over three years in prison for tax evasion - IRS (Defendant name omitted, emphasis added):
According to court documents and evidence presented at trial, Defendant, of Minnetonka, was a commercial airline pilot who retired in 2016. In January 2017, Defendant filed a fraudulent tax return for the 2015 tax year, falsely claiming that he was entitled to a $55,365 tax refund. In reality, Defendant owed more than $49,000 in income taxes that year. In March 2017, Defendant filed a fraudulent tax return for the 2016 tax year, falsely claiming that he was entitled to a $123,370 tax refund. In reality, he owed more than $175,000 in taxes that year. The IRS conducted an audit of Defendant’s 2015 and 2016 tax returns and found that Defendant fraudulently received more than $150,000 in tax refunds to which he was not entitled and owed more than $290,000 in taxes, interest, and penalties for those tax years.
According to the evidence presented at trial, Defendant refused to pay his tax debt and took steps to actively evade the IRS’s collection efforts by hiding his income and assets in bank accounts in the name of shell religious non-profits and by liquidating his retirement accounts and converting the funds into cryptocurrency. Defendant also failed to file federal income tax returns for 2017, 2018, and 2019. It is estimated that Defendant owes the United States more than $300,000.
If you want to turn an ordinary IRS exam into a criminal problem, this might be a textbook way to go about it.
What day is it?
It's Mean Girls Day and National Boyfriend Day. For the rest of us, it's National Techies Day.
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